A new Caspian oil discovery for Kazakhstan could force the country to make new decisions about pipeline routes. RFE/RL correspondent Michael Lelyveld reports.

Boston, 20 April 2000 (RFE/RL) -- Kazakhstan President Nursultan Nazarbaev's suggestion this week about a new Caspian oil field could open a new round in the struggle for influence over the region's exports.

On Tuesday, Nazarbaev hinted that the long-awaited findings from drilling in Kazakhstan's offshore Kashagan field will be significant. Nazarbaev told a group of French businessmen that he had "good news" from the Caspian shelf area where drilling began last August, Reuters reported.

Nazarbaev was quoted as saying: "We have information that the situation in the Caspian, where drilling is going on, is extremely favorable."

The oil industry has suspected for years that Kashagan is no ordinary oil field. Seismic studies have indicated that it contains 4 billion tons of hydrocarbons, making it potentially larger than Kazakhstan's giant Tengiz field.

If those hydrocarbons prove to be oil, the discovery could reverse the recent fortunes of Caspian exploration, which has turned up more gas than oil in the past two years. Last month, Russia raised hopes with Lukoil's announcement that it had found a major deposit in the northern Caspian with 300 million tons of recoverable reserves.

In Kazakhstan's sector of the Caspian, drilling has been conducted by a nine-member consortium that includes U.S., Japanese, Italian, and French firms. The exploration has been conducted with extensive environmental precautions. The first results were delayed by the winter and are now expected in the spring.

But a big discovery of oil could be both good and bad news. While prospects may brighten for Caspian investment, many problems are unresolved.

The United States and Russia are likely to intensify their competition for Caspian export routes even further if Kashagan turns out to be a major oil field. Just as Tengiz became a focus for U.S. policy toward the Soviet Union in the late 1980s, Kashagan and its exports could become critical to
American plans in the region now.

U.S. officials have been trying to convince Nazarbaev to commit some oil exports to the Baku-Ceyhan pipeline, which needs 20 million tons annually to be viable. So far, the discoveries from Azerbaijan's sector have not been enough to fill the proposed line, and Turkmenistan's discoveries have been too small.

Kazakhstan expects to produce 30 million tons of crude oil this year and export at least 22 million tons. Its output will rise fourfold by 2010, according to Nurlan Balgimbaev, head of the state-owned oil company Kazakhoil.

But recently, the country has seemed to be leaning toward Russia for its exports. Last week, Kazakhstan asked Russia to increase the amount of oil it can export through Russian pipelines by 1 million tons a year. Kazakhstan already ships 10 million tons of oil through the Atyrau-Samara pipeline, which can only carry 11.5 million tons a year.

Once the line reaches capacity, Kazakhstan is seeking a $30-million investment to increase its throughput to 15 million tons. Russian officials have been trying to persuade Kazakhstan to export 3 million tons of oil through its new Chechnya bypass pipeline instead. So far, Kazakhstan has only agreed to ship 1 million tons over the
new route.

Kazakhstan is slated to use yet another Russian connection, the Caspian Pipeline Consortium pipeline from Tengiz to Novorossiysk. The project, which is about 30 percent complete, may also be used to carry Russia's oil from the northern Caspian, as well as the expected oil from Kashagan.

But it is not yet clear whether all these links to Russia will assure good relations.

Last month, Russian Deputy Prime Minister Viktor Khristenko issued a strong statement that seemed to renew Moscow's claims to Kazakhstan's offshore fields. Khristenko said that "Russia's consistent position is that the resources of the Caspian should be used jointly by all the Caspian states and not be divided into national sectors."

Khristenko stated that: "Russia's interests in this region are self-evident and they must not be infringed." He added that Russia had opened negotiations with Kazakhstan over the issue, which he characterized as "difficult."

The statements must have come as news to Nazarbaev, who reached an agreement with Russia on demarcation of the northern Caspian in 1998. On April 6, Kazakhstan Foreign Minister Yerlan Idrisov argued that the Khristenko comments must have been misinterpreted.

But Russia's strong tone suggests that there could be pressure on Kazakhstan if Kashagan contains major volumes of oil. Lukoil plans to invest over $6 billion in Russia's part of the Caspian, making its interests a national priority.

As the investments grow, so will the importance of controlling the pipeline routes. Kazakhstan may need Russia's pipelines, but it is unclear what price it will pay.